Columbian Oil The next Saudi Arabia? 1 of 3

Last year I started investing in non-Middle East oil. My instincts were similar to others who predicted that the Arab spring would extend beyond Tunisia creating a very volitile area and thus, higher prices for added risk.  Egypt's reform would make the Suez a 50/50 route leaving the Strait of Hormuz as the next water way to be on the radar. I figured, it's not going to take much for that shipping lane to get F'd up which leaves most foreign oil in a tight spot. So I thought to myself where would oil hungry North America and China get their crude from?

My first thought was Canada, the US and China could get their fix from the Canucks rich oil sands but they only produce roughly 115000 bpd. It wouldn't be enough to satisfy the 18 000 000 bpd and the 9 000 000bpd that the US and China consume daily. Even if the rate triples, which they are poised to do, we're still going to need at least two other sources. So where else is oil in abundance? The Arctic -no way, not in an upcoming election year.  The answer is no further than your local jail or your neighbourhood coke dealer. Yes their is black gold where you get white gold.

Columbia has been known for it's oil and gas deposits for most of the century but hasn't been able to invest enough to make any real dents in the world market. However, in the early 2000s the government lifted its restriction on foreign investments and opened the doors to investors from abroad. One of those companies called Alange Energy (now known as Petromagdalena PMD:TSX) is one that I had my eye on for most of 2011.

The Market reacts to news 

like a 12 yr old girl reacts 

to her twitter account... 

The way I looked at it was two things had to come into play to get my wallet lubed up for Columbian oil.  One of them was increased destabilization of the Middle East governments, which happened. And news coverage that was emotional and sensationalized enough to prompt investor panic.  I know, journalists never sensationalize stories especially ones from the Middle East. So, in 2011, while democracy was spreading like crabs in 10th grade, I bought my first 8-ball of Columbian oil.

It's not my fault the market is almost entirely emotional these days. I quickly learned that the more people invest on their own the more hypersensitive the market is to news stories. It acts more like a 12 year old girl with a twitter account then it does a sophisticated economic system. What most direct investors don't realize is that once it hits the newsstands it's already too late. Yet, sure enough people panic at the tiniest piece of news on CNN or Yahoo, both positive and negative.

Nonetheless, this phenomenon has put Columbian oil into play in my portfolio and if you look at the patterns of Columbian oil companies you'll see that there has been a rather nice upswing. PMD:TSX, the company I invested in has jumped 80%  Since Oct 2011. Pacific Rubiales, the big dog in the region, is up more than 50% since Dec 2011. Will the trend continue? I believe so and all you have to do is understand American foreign policy, military strategy, game theory and consumer trends. Put all those together and it can be quite predictable what is going to happen next.

Tune into for part 2 of this blog, the how and why behind the jump.
I'll inform and entertain you about it. If any of my figures are off, please let me know.